Located in Kansas City, Missouri, the Kansas City Board of Trade (KCBT) is the world’s foremost commodity exchange for the trading of wheat. Its prices are used by the vast majority of the world’s traders, analysts, governments and NGOs when determining future strategies for acquisition of an adequate supply of this essential commodity.
Though not then a commodity exchange, the Kansas City Board of Trade was founded in 1856, shortly after the founding of the city itself: at that time the Board operated as the frontier city’s Chamber of Commerce. The transition to commodity exchange was formalised in 1876, when it became apparent that the rapid increase in wheat production in Missouri and the surrounding states needed an institution to facilitate trading and despatch of the grain being produced. Its position at the confluence of the Kansas and Missouri rivers, both major trading waterways, made Kansas City the obvious choice to host this new exchange.
Since then, the KCBT has grown to become the world’s primary wheat exchange: it has twice had to move to larger premises, in 1925 and 1966. Concentrating on Hard Red Winter Wheat (generally deemed superior to the Soft Red Winter Wheat traded on the Chicago Board of Trade), no additional agricultural commodities have been added to the Kansas City Board of Trade’s list of products, though in 1992 trading commenced in Value Line stock index futures. It was the first exchange in the world to offer this product.
There are two main classes of membership of the Kansas City Board of Trade – Class A and Class B, each available to both individuals and institutions:
- Class A membership: equity membership, allowing trading in all KCBT products. Allowed a vote in elections, are part-owners of the exchange, and may have clearing privileges. 192 Class A memberships are available, and there is no fixed price for purchase: the price depends on supply and demand. A membership purchased in 2007 cost over $700,000, but recent memberships sold have been bought for between £300,000 and $400,000.
- Class B membership: these members are only allowed to trade in Value Line stock index futures, and have no equity stake in the KCBT. They may also vote in elections, but only those pertaining to the product they are allowed to trade in. Their vote is a quarter of the weight of those of Class A members. Given these comparatively lesser privileges, prices are much lower: in the last decade the price was never above $5070.
Both classes of members must meet a number of conditions before approval by the Board of Directors: they must show they have a net worth of at least $25,000, have an acceptable credit rating and are of good character. They must also be at least 18 years old. After acceptance they must attend KCBT’s orientation program, but once this is done they gain access to all of the exchange’s facilities and benefits, the primary of these being exemption from trading fees.
The only commodity traded on the Kansas City Board of Trade exchange is wheat, specifically Hard Red Winter Wheat futures and options. However, there are two different contracts for each depending on the method by which it is traded (ticker symbol/contract code in brackets):
- Hard Red Winter Wheat Futures -
- Open Outcry Wheat Futures (KW).
- Electronic Wheat Futures (KE).
- Hard Red Winter Wheat Options -
- Open Outcry Wheat Options (puts: HP; calls: HC).
- Electronic Wheat Options (OKE. Put code: P; Call code: C).
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